Basel II Pillar III disclosures

Transcription

1 Basel II Pillar III disclosures Executive summary This report has been prepared in accordance with Pillar III disclosure requirements prescribed by the Central Bank of Bahrain, herein refered to as "CBB". CBB Basel II guidelines became effective on 1 January 2008 as the common framework for the implementation of the Basel Committee on Banking Supervision s (Basel Committee) Basel II capital adequacy framework for banks incorporated in the Kingdom of Bahrain. The disclosures in this report are in addition to the disclosures set out in the consolidated financial statements for the year ended 31 December 2013 presented in accordance with the International Financial Reporting Standards (IFRS). 2. Introduction to the Basel II framework The CBB s Basel II framework is based on three pillars, consistent with the Basel II framework developed by the Basel Committee, as follows:- Pillar I Pillar I: Pillar II: Pillar III: calculation of the Risk-Weighted Assets (RWAs) and capital requirement. The capital requirment has to be covered by own regulatory framework. the supervisory review process, including the Internal Capital Adequacy Assessment Process (ICAAP). rules for the disclosure of risk management and capital adequacy information. Pillar I prescribes the basis for the calculation of the regulatory capital adequacy ratio. Pillar I sets out the definition and calculations of the RWAs, and the derivation of the regulatory capital base. The capital adequacy ratio is calculated by dividing the regulatory capital base by the total RWAs. The resultant ratio is to be maintained above a predetermined and communicated level. Under the previously applied Basel I Capital Accord, the minimum capital adequacy ratio for banks incorporated in the Kingdom of Bahrain was 12 percent compared to the Basel Committee s minimum ratio of 8 percent. The CBB also requires banks incorporated in the Kingdom of Bahrain to maintain a buffer of 0.5 percent above the minimum capital adequacy ratio. In the event that the capital adequacy ratio falls below 12.5 percent, additional prudential reporting requirements apply, and a formal action plan setting out the measures to be taken to restore the ratio above the target level is to be formulated and submitted to the CBB. Consequently, the CBB requires BBK to maintain an effective minimum capital adequacy ratio of 12.5 percent. No separate minimum tier 1 ratio is required to be maintained under the CBB s Basel II capital adequacy framework. Under the CBB s Basel II capital adequacy framework, the RWAs are calculated using more sophisticated and risk sensitive methods than under the previous Basel I regulations. Credit risk and market risk are two essential risk types that were included under Basel I, while operational risk has been introduced as a new risk type in the CBB s Basel II capital adequacy framework. The table below summarises the approaches available for calculating RWAs for each risk type in accordance with the CBB s Basel II capital adequacy framework. Approaches for determining regulatory capital requirements as per CBB guidelines Credit risk Market risk Operational risk Standardised Approach Standardised Approach Basic Indicator Approach Foundation Internal Ratings Based Approach (FIRB) Internal Models Approach Standardised Approach The approach applied by BBK for each risk type is as follows: i) Credit Risk For regulatory reporting purposes, BBK is using the Standardised Approach for credit risk. The standardised approach is similar to the basis under the previous Basel I capital adequacy regulations, except for the use of external ratings to derive the RWAs and the ability to use a wider range of financial collaterals. The RWAs are determined by multiplying the credit exposure by a risk weight factor dependent on the type of counterparty and the counterparty s external rating, where available. ii) Market risk For the regulatory market risk capital requirement, BBK is using the Internal Model Approach based on Value-at-Risk (VaR) model. The use of the Internal Model Approach for the calculation of regulatory market risk capital has been approved by the CBB. iii) Operational risk Under the CBB s Basel II capital adequacy framework, all banks incorporated in the Kingdom of Bahrain are required to apply the Basic Indicator Approach for operational risk unless approval is granted by the CBB to use the Standardised Approach. The CBB s Basel II guidelines do not currently permit the use of the Advanced Measurement Approach (AMA) for operational risk. For regulatory reporting purposes, BBK is currently using the Basic Indicator Approach. Under the Basic Indicator Approach, the regulatory capital requirement is calculated by applying an alpha co-efficient of 15 percent to the average gross income for the preceding three financial years. Pillar II Pillar II defines the process of supervisory review of an institution s risk management framework and, ultimately, its capital adequacy. Under the CBB s Pillar II guidelines, all banks incorporated in the Kingdom of Bahrain are required to maintain a 12 percent minimum capital adequacy ratio. Pillar II comprises two processes: an Internal Capital Adequacy Assessment Process (ICAAP), and a supervisory review and evaluation process. The ICAAP incorporates a review and evaluation of risk management and capital relative to the risks to which the bank is exposed. BBK has developed ICAAP document and it addresses all components of BBK s risk management, from the daily management of more material risks to the strategic capital management of the Group. The supervisory review and evaluation process represents the CBB s review of the Group s capital management and an assessment of internal controls and corporate governance. The supervisory review and evaluation process is designed to ensure that institutions identify their material risks, allocate adequate capital, and employ sufficient management processes to support such risks. The supervisory review and evaluation process also encourages institutions to develop and apply enhanced risk management techniques for the measurement and monitoring of risks in addition to the credit, market and operational risks addressed in the core Pillar I framework. Other risk types which are not covered by the minimum capital requirements in Pillar I include liquidity risk, interest rate risk in the banking book, business risk and concentration risk. These are covered either by capital, or risk management and mitigation processes under Pillar II. Pillar III In the CBB s Basel II framework, the third pillar prescribes how, when, and at what level information should be disclosed about an institution s risk management and capital adequacy practices.

2 The disclosures comprise detailed qualitative and quantitative information. The purpose of the Pillar III disclosure requirements is to complement the first two pillars and the associated supervisory review process. The disclosures are designed to enable stakeholders and market participants to assess an institution s risk appetite and risk exposures and to encourage all banks, via market pressures, to move toward more advanced forms of risk management. Under the current regulations, partial disclosure consisting mainly of quantitative analysis is required during half year reporting, whereas full disclosure is required to coincide with the financial year end reporting. 3. Group structure The Group s financial statements are prepared and published on a full consolidation basis, with all subsidiaries being consolidated in accordance with IFRS. For capital adequacy purposes, all subsidiaries are included within the Group structure. However, the CBB s capital adequacy methodology accommodates both normal and aggregation forms of consolidation. The principal subsidiaries, associates and joint ventures and basis of consolidation for capital adequacy purposes are as follows: Subsidiaries Domicile Ownership Consolidation basis CrediMax B.S.C. (c) Kingdom of Bahrain 100% Full consolidation Invita B.S.C. (c) Kingdom of Bahrain 100% Full consolidation Global Payment Serivces W.L.L. (GPS)* Kingdom of Bahrain 55% Full consolidation Associates EBLA Computer Consultancy K.S.C.C. State of Kuwait 36% Risk-weighted Diyar Al Harameen AL Ola Limited Cayman Islands 35% Risk-weighted Saudi MAIS Company for Medical Products Kingdom of Saudi Arabia 24% Risk-weighted Bahrain Commercial Facilities Company B.S.C. (c) Kingdom of Bahrain 23% Aggregation The Benefit Company B.S.C. (c) Kingdom of Bahrain 22% Aggregation Joint ventures Sakana Holistic Housing Solutions B.S.C. (c) Kingdom of Bahrain 50% Aggregation BBK Geojit Securities K.S.C. State of Kuwait 40% Aggregation * Shareholding through CrediMax subsidiary. There are no restrictions on the transfer of funds or regulatory capital within the Group. 4. Capital components - consolidated Tier 1 capital is defined as capital of the same or close to the character of paid-up capital and comprises share capital, share premium, retained earnings and eligible reserves. Eligible reserves include general reserve, statutory reserve, and unrealised losses arising from revaluation of equities classified as available-for-sale, and exclude unrealised losses arising from revaluation of debt securities classified as available-for-sale. Tier 2 capital comprises interim profits, qualifying subordinated term finance, collective impairment provisions, and unrealised gains arising from revaluation of equities classified as available-for-sale, though limited to 45 percent. It excludes unrealised gains arising from valuing debt securities classified as available-for-sale. The subordinated term financing facilities, amounting to US$ million discounted out of the total amount outstanding US$ million (initital amount raised US$ 145 million), are part of its US$ 1 billion Euro Medium Term Deposits Notes Programme. The subordinated financing facilities have been approved for inclusion in tier 2 capital for regulatory capital adequacy purposes by the CBB. The CBB applies various limits to elements of the regulatory capital base. The amount of innovative tier 1 securities cannot exceed 15 percent of total tier 1 capital; qualifying tier 2 capital cannot exceed tier 1 capital; and qualifying subordinated term finance cannot exceed 50 percent of tier 1 capital. There are also restrictions on the amount of collective impairment provisions that may be included as part of tier 2 capital, which should be maximum of 1.25 percent of the risk weight. In accordance with the CBB s Basel II capital adequacy framework, certain assets are required to be deducted from regulatory capital rather than included in risk-weighted assets (RWAs). At 31st December 2013, BD million was deducted from regulatory capital in relation to securitisation exposures that were rated below BB- or were unrated. In accordance with the CBB s Basel II capital adequacy framework, the deductions are applied 50 percent from tier 1 and 50 percent from tier 2 capital. There are no impediments on the transfer of funds or regulatory capital within the Group other than restrictions over transfers to ensure minimum regulatory capital requirements are met for subsidiary companies. Tier 1 capital BD 000 Share capital 90,635 General reserves 43,700 Statutory reserves 46,825 Share premium 39,919 Retained earnings and others 41,177 Non-controlling interest 718 Unrealised losses arising from fair valuing equities (1,265) Deductions from tier 1 capital (17,328) Total tier 1 capital 244,381 Tier 2 capital Current year profit 45,051 45% of unrealised gains arising from fair valuing equities 6,988 Collective impairment provisions 24,118 Subordinated term debt 5,105 Deductions from tier 2 capital (17,328) Total tier 2 capital 63,934 Total available capital (tier 1 + tier 2) 308,315 Aggregation 33,770 Total eligible capital 342, Capital adequacy The Group s policy is to maintain a strong capital base so as to preserve investor, creditor and market confidence and to sustain the future development of the business. The impact of the level of capital on shareholders return is also recognised, as well as the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position. The Group manages its capital structure and makes adjustments to the structure taking account of changes in economic conditions and strategic business plans. The capital structure may be adjusted through the dividend payout, and the issue of new shares, and subordinated term finance. BBK aims to maintain a minimum total capital adequacy ratio in excess of percent. The CBB s current minimum total capital adequacy ratio for banks incorporated in the Kingdom of Bahrain is set at 12 percent. The capital adequacy ratio of the Group at was percent. Strategies and methods for maintaining a strong capital adequacy ratio BBK prepares multi-year strategic projections on a rolling annual basis which include an evaluation of short term capital requirements and a forecast of longer-term capital resources. 71

3 5. Capital adequacy continued Capital ratios - consolidated and subsidiaries above 5% of group capital Total capital ratio Tier 1 capital ratio BBK - Group 15.33% 12.47% CrediMax 64.32% 45.20% 6. Credit risk Pillar III Disclosures This section describes the BBK s exposure to credit risk, and provides detailed disclosures on credit risk in accordance with the CBB s Basel II framework, in relation to Pillar III disclosure requirements. Definition of exposure classes BBK has a diversified on and off statement of financial position credit portfolio, the exposures of which are divided into the counterparty exposure classes defined by the CBB s Basel II capital adequacy framework for the standardised approach for credit risk. A highlevel description of the counterparty exposure classes, referred to as standard portfolios in the CBB s Basel II capital adequacy framework, and the generic treatments, i.e. the risk weights to be used to derive the RWAs, are as follows:- Sovereigns portfolio The sovereigns portfolio comprises exposures to governments and their respective central banks. The risk weights are zero percent for exposures in the relevant domestic currency, or in any currency for exposures to GCC sovereigns. Foreign currency claims on other sovereigns are risk weighted based on their external credit ratings. Certain multilateral development banks as determined by the CBB may be included in the sovereigns portfolio and treated as exposures with a zero percent risk weighting. Public Sector Entities (PSE) portfolio Claims on Bahraini PSEs, and claims on PSEs on domestic currency - which are assigned a zero percent risk weight by their respective country regulator, can be assigned a zero percent risk weight. All other PSEs are risk-weighted according to their external ratings. Banks portfolio Claims on banks are risk-weighted based on their external credit ratings. A preferential risk weight treatment is available for qualifying short term exposures. Short term exposures are defined as exposures with an original tenor of three months or less. The Bank's portfolio also includes claims on investment firms, which are risk-weighted based on their external credit ratings, though without any option for preferential treatment for short term exposures. Corporates portfolio Claims on corporates are risk-weighted based on their external credit ratings. A 100 percent risk weight is assigned to exposures to unrated corporates. A preferential risk weight treatment is available for certain corporates owned by the Government of Bahrain, as determined by the CBB, which are assigned a zero percent risk weight. Regulatory retail portfolio Claims on retail portfolio are risk-weighted at 75 percent, except for past due portfolio. Mortgage portfolio Claims which are fully secured by first mortgages on residential property that is or will be occupied by the borrower, or that is leased, must carry a risk weighting of 75 percent. Claims secured mortgages on commercial real estate are subject to a minimum of 100 percent risk weight. If the borrower is rated below BB-, the risk-weight corresponding to the rating of the borrower must be applied. Equities portfolio The equities portfolio comprises equity investments in the banking book, i.e. the available-for-sale securities portfolio. A 100 percent risk weight is assigned to listed equities while unlisted equities are weighted at 150 percent. In addition to the standard portfolios, other exposures are assigned to the following exposure classes: Investments in funds portfolio The risk weight for claims on corporate will be used to determine the risk weight for investments in rated funds. Unrated funds will be assigned a risk weight of 100 percent if listed, and 150 percent if not listed. Past due exposures This includes claims, for which the repayment is overdue for more than ninety days. The risk weighting applied for such loans is either 100 percent or 150 percent, depending on the level of provisions maintained against the loan. Holding of real estate All holding of real estate by banks (owned directly or by the way of investments in real estate companies, subsidiaries or associated companies or other arrangements such as trusts, funds or Real Estate Investment Trusts (REITs) must be risk weighted at 200 percent. Premises occupied by the bank are weighted at 100 percent. Other assets and holdings of securitisation tranches Other assets are risk-weighted at 100 percent. Securitisation tranches are risk weighted based on their external credit ratings. Risk weightings range from 20 percent to 350 percent. Exposures to securitisation tranches that are rated below BB- or are unrated are deducted from regulatory capital rather than subject to a risk weight. All BBK's holding of securitisations is part of the Bank's investment portfolio. External rating agencies BBK uses ratings issued by Standard & Poor s, Moody s and Fitch to derive the risk weightings under the CBB s Basel II capital adequacy framework. Where ratings vary between rating agencies, the highest rating from the lowest two ratings is used to represent the rating for regulatory capital adequacy purposes. Credit risk presentation under Basel II The credit risk exposures presented in most of this report differ from the credit risk exposures reported in the consolidated financial statements. Differences arise due to the application of different methodologies, as illustrated below:- Under the CBB s Basel II framework, off statement of financial position exposures are converted into credit exposure equivalents by applying a Credit Conversion Factor (CCF). The off statement of financial position exposure is multiplied by the relevant CCF applicable to the off statement of financial exposure position category. Subsequently, the exposure is treated in accordance with the standard portfolios as referred to above in this report, in the same manner as on statement of financial position exposures. Credit risk exposure reporting under Pillar III is frequently reported by standard portfolios based on the type of counterparty. The financial statement presentation is based on asset class rather than the relevant counterparty. For example, a loan to a bank would be classified in the Bank's standard portfolio under the capital adequacy framework although is classified in loans and advances in the consolidated financial statements. Certain eligible collateral is applied to reduce exposure under the Basel II capital adequacy framework, whereas no such collateral netting is applicable in the consolidated financial statements. Based on the CBB s Basel II guidelines, certain exposures are either included in, or deducted from, regulatory capital rather than treated as an asset as in the consolidated financial statements, e.g. unrated securitisation tranches. 72

4 7. Capital requirement for risk-weighted exposure Gross credit exposures (before risk mitigation) Eligible financial collateral Credit risk after risk mitigation Risk-weighted asset Regulatory capital required 12% Sovereign 869,039-48,321 25,798 3,095 Public sector entities 178,633-54,712 25,031 3,004 Banks 608, , ,181 32,782 Corporates 1,220,194 36,347 1,125,054 1,123, ,848 Regulatory retail 222,439 19, , ,538 18,305 Mortgage 83,878 1,614 82,265 61,767 7,412 Equity 94, ,184 12,862 Investment in funds 2,620-2,620 3, Past due 77, , ,171 12,621 Real estate 32, ,846 6,702 Other assets 58,523-58,523 58,523 7,022 Cash items 16, Total 3,465,538 57,926 2,260,198 1,992, ,137 Aggregation 49,260-49,260 49,260 5,911 Total credit risk 3,514,798 57,926 2,309,458 2,042, ,048 Market risk ,625 1,155 Operational risk ,728 21,567 Total risk-weighted exposure 3,514,798 57,926 2,309,458 2,231, ,770 Included in the equity category investment in insurance entity that is risk-weighted rather than deducted from eligible capital, this, if deducted will reduce the eligible capital to BD 338,769 thousand: Entity Nationality Ownership % Risk-weighted asset Impact on regulatory capital Bahrain Kuwait Insurance Company B.S.C. (c) "BKIC" Kingdom of Bahrain 6.82% 2, Collateral valuation policy The Bank has detailed policies and procedures for valuing collateral/securities offered for various credit facilities. The collateral is valued, at minimum, quarterly or annually, based on the type of security. More frequent valuations are also considered if warranted by market volatility and declining trend in valuations are observed. The basis of valuation for different types of securities such as equity, debt, and real estate is also clearly defined in the policies. 8. Funded and unfunded total credit exposure Total gross credit exposures Total funded credit exposure Total un-funded credit exposure Sovereign 868, Public sector entities 173,295 5,338 Banks 561,929 46,910 Corporates 1,008, ,596 Regulatory retail 218,423 4,016 Mortgage 83,878 - Equity 94,797 - Investment in funds 2, Past due 77,391 - Real estate 32,871 - Other assets 58,523 - Cash items 16,314 - Total 3,196, ,728 Aggregation 49,260 - Total credit risk 3,246, , Average credit exposure The following are the average quarterly balances for the full year: BD 000 Sovereign 921,556 Public sector entities 178,155 Banks 634,533 Corporates 1,178,564 Regulatory retail 208,926 Mortgage 80,270 Equity 79,751 Investment in funds 2,840 Past due 92,659 Real estate 30,685 Other assets 56,907 Cash items 16,438 Total 3,481,284 Aggregation 62,256 Total credit risk 3,543,540 73

5 10. Concentration of credit risk by region GCC North America Europe Asia Others Total BD 000 BD 000 BD 000 BD 000 BD 000 BD 000 Cash and balances with central banks 221, , ,352 Treasury bills 308, , ,125 Deposits in banks and other financial institutions 135,477 27,499 33,476 5, ,384 Loans and advances to customers 1,424, ,801-1,618,535 Investments in associated companies 17, ,202 24,099 Investment securities 493,338 32,422 71, ,701 31, ,896 Other assets 66, ,255-68,419 Total funded exposure 2,667,728 59, , ,009 38,156 3,196,810 Unfunded commitments and contingencies 231,835 4,821 7,282 12,551 12, ,728 Aggregation 49, ,260 Total credit risk 2,948,823 64, , ,560 50,395 3,514, Concentration of credit risk by industry Trading and manufacturing Banks and other financial institutions Construction and real estate Government and public sector Individuals Others Total Cash and balances with central banks - 15, , ,352 Treasury bills , ,125 Deposits in banks and other financial institutions - 202, ,384 Loans and advances to customers 478, , ,796 48, , ,211 1,618,535 Investments in associated companies 9,810-6, ,087 24,099 Investment securities 19, ,725 16, ,334-6, ,896 Other assets ,419 68,419 Total funded exposure 507, , , , , ,679 3,196,810 Unfunded commitments and contingencies 104,074 49,967 73,614 2,626 2,232 36, ,728 Aggregation - 49, ,260 Total credit risk 611, , , , , ,894 3,514, Concentration of credit risk by maturity Within 1 month 1 to 3 months 3 to 6 months 6 to 12 months 1 to 5 years 5 to 10 years 10 to 20 years Above 20 years Total Cash and balances with central banks 158, , ,352 Treasury bills 24, ,450 67,793 40, ,125 Deposits in banks and other financial institutions 185,344 17, ,384 Loans and advances to customers 77, ,885 97, , , ,206 41, ,891 1,618,535 Investments in associated companies ,099 24,099 Investment securities 5,081 37,103 41,443 57, , ,904 2,291 94, ,896 Other assets 38, , ,136 68,419 Total funded exposure 489, , , , , ,110 44, ,068 3,196,810 Unfunded commitments and contingencies 47,329 34,092 65, ,389 10,023 1, ,728 Aggregation , ,316 49,260 Total credit risk 536, , , , , ,043 44, ,608 3,514,798 74

6 13. Impaired loans and provisions 17. Restructured loans Principle and interest outstanding Impaired loans Specific provisions BD 000 BD 000 BD 000 Manufacturing 254,718 14,795 11,812 Mining and quarrying 31,246 2, Agriculture, fishing and forestry 5, Construction 158,185 11,573 4,858 Financial 284,121 31,892 22,392 Trade 212,171 4,813 3,909 Personal / Consumer finance 232,201 16,080 14,774 Credit cards 36, ,137 Commercial real estate financing 174,570 39,196 14,630 Residential mortgage 93,247 6,390 2,029 Government 49, Technology, media and telecommunications 86, Transport 16, Other sectors 84,971 1, Total 1,719, ,965 76, Reconciliation of changes in impaired loans and provisions Specific impairment provisions Collective impairment provisions BD 000 BD 000 At beginning of the year 94,215 16,739 Amounts written off (25,517) - Write backs / cancellation due to improvement (3,266) (61) Additional provisions made 12,930 8,864 Exchange adjustment and other movements 352 (1,424) Notional interest on impaired loans (1,918) - Balance at reporting date 76,796 24, Impaired and past due loans by region GCC North America Europe Asia Others Total Past due loans 78, ,232-90,866 Impaired loans 125, , ,965 Specific impairment provisions including interest in suspense 74, ,987-76,796 Collective impairment provisions 23, , Ageing of impaired past due loans 3 months up to 1 year 1 to 3 years Over 3 years Total Impaired past due loans 15,342 42,901 71, ,965 Less: specific provisions 5,457 9,919 37,380 52,756 Less: Interest in suspense 945 4,724 18,371 24,040 Net outstanding 8,940 28,258 15,971 53,169 Market value of collateral 25,935 47,871 34, ,921 BD 000 Loans restructured during the period 51,296 Impact of restructured facilities and loans on provisions 15,472 The above restructuring did not have any significant impact on present and future earnings and were primarily extentions of the loan tenor, revisions in interest rate, and additional collateral received. 18. Market risk disclosures for banks using the Internal Models Approach (IMA) for trading portfolios The market risk Internal Model Approach (IMA) is being used to measure Value-at-Risk (VaR) for calculating capital charge arising from market risk exposures (mainly foreign exchange and interest rate risk positions) of the trading book. The VaR model quantifies the maximum potential loss that could occur in the trading book risk positions under normal market conditions, at 99 percent confidence level, on a 10-day horizon. BBK maintains a prudent approach to handle market risk exposures guided by Market Risk Policy and Procedure. The Position, Stoploss and VaR limits are monitored by Middle Office which is part of the Risk & Credit Management department i.e. independent of the Business Group, and a daily Risk Report is compiled and circulated to executive management. In addition to the above, the Middle Office also carries out valuation of the investment portfolio independently as per the internal policies and procedures. Furthermore, BBK also conducts stress testing and backtesting of market risk positions. The summary of VaR of the trading book during 2013 is as follows: VaR results for (10 day 99%) Global (Bahrain and Kuwait) 1 January 2013 to VaR Asset class Limit 31 Dec 2013 High VaR Low VaR Average VaR Foreign exchange Interest rate The Bank conducts backtesting of VaR on a daily basis in compliance with CBB regulations to validate the internal VaR model and to check whether or not the model can predict potential losses with a fair degree of accuracy. Under backtesting, the daily VaR numbers are compared with the mark-to-market profit or loss figures (on actual Profit & Loss basis and also hypothetical Profit & Loss basis). If this comparison is close enough, the backtest raises no issues regarding quality of the risk measurement model. The backtesting results for the period 1 January 2013 to 31 December 2013 confirmed that there was no occasion on which a daily trading loss exceeded VaR figure. Month end VaR (10 day 99%) Month VaR in BD 000 January February March April May June July August September October November December

7 Basel II Pillar III disclosures continued 18. Market risk disclosures for banks using the Internal Models Approach (IMA) for trading portfolios continued The following graph shows that the daily actual Profit & Loss (Actual Profit & Loss basis) vis-à-vis one day VaR, for the review period. Value-at-Risk backtesting 1 January 2013 to December day VaR 99% (-Ve) Actual P&L Zero line 1 day VaR 99% (+Ve) VaR & P&L Jan 13 Apr 13 Jul 13 Oct 13 Dec Concentration risk to individuals where the total exposure is in excess of single obligor limit of 15 percent Sovereign exposures* 664,835 Total 664,835 * The above exposures are exempted from deductions as per the CBB guidelines. 20. Credit derivatives exposure Collateral debt obligations 805 Total credit derivatives Equity positions in the banking book Publicly traded equity shares 70,024 Privately held equity shares 23,240 Total 93,264 Capital required 11, Gains on equity instruments Realised gains / losses in the consolidated statement of profit or loss 967 Unrealised gains / losses in tier 1 capital (eligible portion) (1,265) Unrealised gains / losses in tier 2 capital (eligible portion) 6,988 76